Friday, November 20, 2015

From Now on, Just Demand $1 Trillion . . .

Dhawan v. Biring, No. B257977 (D2d5 Oct. 28, 2015)

Plaintiff here what I and every lawyer who has filed a
state court complaint arising from a business dispute has probably also done. Notwithstanding Code of Civil Procedure § 425.10(a)(2)—which says that “[i]f the recovery of money or damages is demanded [in a non-personal injury case] the amount demanded shall be stated—Plaintiff’s prayer for relief said only that he was entitled to damages “according to proof.” After all, in a case where the damages calculation likely depends on the testimony an expert who might not even be hired for many months, who wants to commit?

Generally it makes no difference. Under
Code of Civil Procedure § 580(a), in a contested case the court can grant any relief consistent with the complaint, regardless of whats in the prayer. But when defendant defaults, it becomes a bigger deal, because in those circumstances § 580(a) expressly prohibits any award of relief not demanded in the complaint. 

Defendant here did default, however, and that put Plaintiff in a pickle. Amending his complaint to state the now-absolutely necessary damages demand would require Plaintiff to serve Defendant anew and thus effectively relieve Defendant from the entered default on the original complaint. What’s the chance a defendant defaults twice? So to avoid that option, Plaintiff served Defendant with a “statement of damages” under Code of Civil Procedure § 425.11—which authorizes this practice in personal injury cases where, as an exception to the general rule, a plaintiff is not allowed to plead a damages number. The trial court ultimately entered a default judgment on the amount in the notice.

More than a year later, Defendant moved to vacate the judgment as void under
Code of Civil Procedure § 473(d) because the damages exceeded those pleaded in the complaint. The court of appeal agrees, and reverses. 

Because of the due process issues implicated in defaults, § 580 gets strictly construed. Prior cases have held, for instance, that if the number isn’t in the complaint, it’s not enough even if Defendant had actual notice of the damages. Given that, the court isn’t inclined to let § 425.11 serve as an end-around of the facial requirement under § 580 that an ordinary plaintiff plead his damages in his complaint. For the same reason, Plaintiff couldn’t smuggle notice of his regular damages onto his statement of his punitive damages—the amount of which which also can’t be pleaded—as required under Code of Civil Procedure § 425.115. 

Further, a default judgment for more than demanded damages isn’t just voidable; its full-blown void. So it is subject to collateral attack under § 473(d), which doesn’t have the same time limits and factual predicates that apply to an attack on a merely voidable judgment under § 473(b).


Thursday, November 19, 2015

Don't Be the Go-To Guy on ERISA

UCFW & Employers Benefit Trust v. Sutter Health, No. A143399 (D1d5 Oct. 27, 2015)

A union ERISA trust sued a healthcare provider for antitrust violations, alleging that the provider enters anti-competitive agreements with insurance networks that have the effect of driving up the cost of healthcare. The provider moved to compel arbitration, even though the trust isn’t a party to any contract with the network that contains an arbitration clause. The provider argued that the trust was nonetheless bound to arbitrate because (1) a provision in state healthcare law bound the trust to a different agreement between the the provider and the insurance network that had contracted with the trust; (2) the trust was equitably estopped; and (3) the network was the trust’s agent. The trial court denied the motion and the court here affirms.

I don’t do ERISA law, so on the first issue, it will have to suffice to say that after a lengthy discussion, the court held that the provider’s interpretation of the healthcare statutes was wrong: The network was not bound to the provider/network contract. 

As for equitable estoppel, that rule requires plaintiff to arbitrate when, although it is not a party to a contract, its claims are so intertwined with the contract that plaintiff is effectively trying to enforce some of its terms. Because its not fair to let plaintiff pick and chose what parts of the contract to enforce, the arbitration clause can be enforced against plaintiff even though its not a signatory. But that’s not the case here, since the whole point of plaintiffs claim is that the provider/insurance network contract is illegal. Given that allegation, fairness does not require the trust to stand on the contract’s terms and accept arbitration. 

And as to agency, the facts showed that, at best, the trust used some of the insurance network’s processing forms. That hardly made the network an agent of the trust.


Wednesday, November 18, 2015

§ 425.16(c) Sanctions Require an Explanation

Nunez v. Pennisi, No. H039910 (D6 Oct. 27, 2015)

This is an appeal of an order denying anti SLAPP motion in a malicious prosecution case and ordering defendants to pay fees as a sanction for filing a frivolous motion under Code of Civil Procedure § 425.16(c). 

By its very nature, the case arises from protected activity—the underlying lawsuit that was allegedly maliciously prosecuted. So it all comes down to whether plaintiff showed a probability of prevailing. The court ultimately finds that one plaintiff established a probability of prevailing against one defendant, but there was no merit as to all the other claims. 

As to the sanctions, the kind of split decision on the merits that resulted here doesnt seem to merit a finding that the motion was totally frivolous. In any event, in awarding fees based on the denial of an anti-SLAPP motion, trial courts are required to follow the procedures under § 128.7, the statute that generally governs sanctions for frivolous filings. Those rules require the trial court to explain its reasoning. Since the trial court didn’t do that here, on remand it needs either to give an explanation or deny sanctions.

Reversed, in part, and remanded.

Tuesday, November 17, 2015

One More Chance to Lose . . .

Jameson v. Desta, No. D066793 (D4d1 Oct. 20, 2015)

Pro se Plaintiff in this thirteen-year-old case is on his fourth appeal. The first three times he won; over a ten-year span, he managed to get two of trial court’s dismissal orders and a summary judgment reversed. This time, the trial court nonsuited him during his opening statement. Whether right or wrong, he forfeits his appeal on that issue because he couldn’t afford a court reporter to make a record. That seems pretty arbitrary and unfair, particularly since the Legislature recently modified the reporter fee statute—Government Code § 68086(b)—to say that for an indigent litigant with a filing fee waiver, the official reporters fee is waived. The court here thinks differently, because the trial court in question does not generally provide official reporters for trials. It makes parties hire their own. So it’s not a question of a fee waiver, but of plaintiff’s inability to afford the private reporter pro tem he needed to hire to make his record. Still seems unfair.


Full disclosure: I am representing the appellant in this case pro bono in filing a petition for review with the California Supreme Court. Well see . . . .

**Update: Review Granted!

Sometimes, It's Good to Be a Trucker . . .

Garrido v. Air Liquide Indus. U.S. LP, No. B254490 (D2d4 Oct. 26, 2015)

Before the U.S. Supreme Court stepped in with AT&T v. Concepcion, California state law more of less said that class action waivers in employment and consumer arbitration agreements are not enforceable. (Technically, there were multifactor tests, but most of the time they came out in favor of unenforceability.) Concepcion expressly reversed that rule for consumer contacts, abrogating a case called Discover Bank. And as the Cal. Supremes recognized more recently in the Iskanian case, the logic of Concepcion applies to employment cases too, thus abrogating their prior Gentry case.

But the whole reasoning of Concepcion depends on its reading of the Federal Arbitration Act’s preemption provision in 9 U.S.C. § 2. There are cases, however, to which the FAA, and thus its preemption rule, doesn’t apply. As the court recognizes here, in those cases, the logic of Concepcion shouldn’t control. Instead, in the absence of any indication that California state arbitration law has changed to reject the earlier Discover Bank and Gentry rationales on state law grounds, those cases are still good law when an agreement isn’t not governed by the FAA.

Notably, the FAA has an express carve out for “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” 9 U.S.C. § 1. Courts have read the final "any other class of workers" catchall to mean only “transportation workers.” And since plaintiff here is a truck driver with an interstate route, the FAA does not apply to his contract. In the absence of that, the California Arbitration Act applies, and without the FAA to preempt state law, the old Gentry rule controls. Which means that the class waiver in plaintiff’s employment contract can’t be enforced.


Sunday, November 15, 2015

Not So Fundamental When Partners Are Involved

Singerlewak LLP v. Gantman, No. B259722 (D2d8 Jul. 29, 2015*)

Substantive judicial review of the correctness of arbitration decisions is extremely limited. California does, however, recognize a narrow exception to that rule: an award may be vacated as beyond the arbitrator’s power if it contravenes an “explicit legislative expression of public policy.” The rule applies only if the award runs afoul of a very important and very clear public policy of the state that has been codified into statute.

Business & Professions Code § 16600—which prohibits employment non-compete agreements—is probably one of those policies. Ask someone about non-competes. If they know anything at all, they know they are basically not enforceable in California. 

But this case involves the enforcement of a non-compete against a partner departing a partnership. So the merits aren’t controlled by § 16600. They are instead are controlled by a special exception in § 16602, which make non-competes are enforceable against ex-partners, so long as they are reasonable and geographically limited. Given the non-categorical nature of §16602, claims that an arbitrator might have erred in applying § 16602 aren’t so anathema to a state statutory policy to fall within the public policy exception. So the trial court here didn’t have authority to review the substance of the award, and it erred with it decided otherwise.


*This case was decided back in July, by ordered published under Rule of Court 8.1120(c) by the California Supreme Court on Oct. 21, 2015. This is due to a glitch in publication rules, where sometimes the Court of Appeal runs out of time under the rules to order publication while it still technically has jurisdiction over the case. (For instance, if rehearing petitions take a long time before eventually being denied.) Rule 8.1220(c) is a fix. The Court of Appeal sends the decision to the Supreme Court and recommends that they order publication, which is what happened here.

Tuesday, November 10, 2015

Lawyers Ruin Everything!

Dorsey v. Superior Court, No. D067836 (D4d1 Oct. 22, 2015)

You can’t have an attorney in a small claims case, but you can for the limited appeals that are allowed in one. In such an appeal, Code of Civil Procedure § 116.780(c) permits an award of an attorneys fee of up to $150$1,000 if the case is frivolous. But what happens when the small claims dispute involves a contract with an attorney fee provision? Can the prevailing parties get a reasonable fee, or are they limited to 150 bucks? The trial court in this case (in an appeal de novo in small claims, see § 116.770) awarded plaintiff $1,500 in a lease dispute, but added over $10 grand in under an attorneys’ fee provision in the lease. The court here grants a writ. It holds that, in light of the policy behind keeping small claims cheap, quick, simple, and fair, the $150 limit under § 116.780(c) trumps any attorney fee provisions the parties might have in their contract. Otherwise, fights over fees could readily eat up all the advantages of going to small claims in the first place.

Writ granted.

Monday, November 9, 2015

But Can They Handle the Proof?

Alberts v. Aurora Behavioral Health Care, No. B248748 (D2d1 Oct. 16, 2015)

This is a wage and hour class action brought by nurses at two mental hospitals. The trial court denied class cert for lack of commonality grounds, but the court of appeal reverses. The court finds that plaintiffs presented enough evidence that the hospitals had a practice of understaffing that—when combined with the professional and ethical obligations mental health nurses have to their patients—resulted in the routine denial of meal and rest breaks and de facto requirements to work off the clock. At the end of the day, the claims depend on a common contention about whether the hospital’s practices and policies fulfilled its obligations under the Labor Code. That was sufficient to establish commonality, notwithstanding the fact that the evidence submitted at class certs showed that the denials of breaks and the unpaid overtime were far from universal within the class. 

The court notes, however, that on remand, the trial court should consider whether the common issues actually predominate and whether the case is manageable as a class action. Justice Rothschild, concurs, reiterating this point. He notes that the alleged illegality here does not arise from on official policy, but from a de facto one. While he agrees with the court that whether or not that existed is a common question, he points out that a de facto policy case is likely to implicate much more individualized proof of liability. In those instances, the line between a voluntarily missed break and a by-the-circumstances compelled one is blurry. Moreover, the record in this case revealed a lot of complexity in the number of class members, variety in job duty and location, and variety in the class members' actual experiences with meal and break issues. Under those circumstances, managing a trial of the case could prove pretty difficult. So Justice Rothschild suggests that the trial court should take a hard look on issues of manageability and predominance on remand before agreeing to certification.